Preventing Will Contests and Estate Disputes

Preventing Will Contests and Estate Disputes

By Edward H. Miller, Esq. & Gregory M. Pomije, Esq.

One of the greatest threats to an individual’s legacy is a Will contest. A variety of sociological factors have made Will contests more common over recent decades. Due to the increase in divorce in America, there are more blended families from second marriages today than in years past. Many members of modern families live far away from one another. Distance within a family increases the chance of miscommunication. It is harder to convey honesty and emotional empathy over the telephone. If a family is geographically spread out, an elderly person may become more susceptible to elder abuse, fraud, and undue influence, any of which can promulgate litigation. Of course, our society has become quite litigious. Will contests are often depicted in Hollywood films as dramatic and quick judicial matters with a clear winner; in reality, they are often drawn out negotiations that last for many seasons, with a “victory” being pyrrhic in nature, having come at too great a cost. Thus, Will contests are a serious threat that each family, even those that are harmonious, should take steps to avoid.

The Terminology of Estate Disputes

The terminology of litigation can be confusing. Estate litigation is a relatively arcane type of law. Many disputes today are not “Will contests” because they involved Trusts, instead of Wills. Trusts can be created as freestanding instruments, which generally do not mandate the involvement and oversight of a Commissioner of Accounts. (Trusts can also be created pursuant to a Will; these Trusts are called “testamentary” Trusts, and are subject to the accounting requirements of a Commissioner of Accounts.) There are procedural and technical differences in how litigation unfolds depending on whether the instrument in dispute is a freestanding Trust, a testamentary Trust, or a traditional Will. Thus, prior to responding to any litigious situation, or the threat of litigation, it is important to understand the legal background of what is technically occurring.

“No Contest” Clauses

Wills and Trusts sometimes include in terrorem “No Contest” clauses which are intended to stop a beneficiary from receiving funds if he or she disputes the estate plan. Such clauses should not be utilized lightly. There are some situations, such as drafting errors, which may require a petition for aid and assistance. A “No Contest” clause that is too broad may stop a family from receiving a final answer on a question about the instrument.

Family Circumstances Can Prompt Litigation

If a family faces special circumstances, it is important to consider ways to keep such circumstances private. Wills are publicly recorded documents. If a beneficiary of a Will receives an inheritance, but such inheritance is placed in trust for a private reason, such as past

drug abuse or alcoholism, the beneficiary will feel that his or her “dirty laundry” has become a matter of public record. However, the other option, creating a Trust for the beneficiary pursuant to a revocable trust, has some caveats as well. The Trust should include language requiring that the beneficiary be “kept in the loop” regarding any major decisions and should include language relating to any special circumstances that the beneficiary faces. This language can be a moving target and should be revisited on an annual basis.

Asset Related Litigation

While estate litigation often results from personal circumstances, sometimes the assets in an estate can lead to litigation. Examples of this phenomenon include 1) issues due to a lack of liquidity or a lack of a fair market for an asset, 2) differences in how family members value an asset, 3) differences in how an asset in taxed between the time an estate plan is drafted and when it is implemented, and 4) issues of waste, such as environmental impacts upon real property holdings. Certain assets are rife for litigation, and experienced attorneys know how to plan around such assets. Family farms and vacation homes often have dramatically different carrying costs between one generation and another. Things and emotions are often deeply intertwined, and older generations should give younger generations that ability to articulate differences of opinion in a non-judgmental environment. Many children fear alienating parents if they say that a family vacation home should be sold. A family business is usually “worth” a lot more to family members who work in the business on a day to day basis than it is to those who do not. Experienced attorneys know how to incorporate valuations, buy-sell agreements, or life insurance policies into an estate plan to avoid such tensions.

Inherited Interest Litigation

Some forms of inheritance are more likely to be litigated than others. One of the most problematic examples of this kind of interest is the life estate. A person who receives a life estate is in a tough position; he or she has to bear the burden of carrying costs without the benefit of true ownership. Fractional interests are also likely to lead to litigation.

It is important to consider steps to avoid estate litigation when reviewing one’s estate plan. Although some family circumstances and assets make litigation more probable, litigation can occur in even the most cordial families. Consistently reviewing an estate plan to ensure that it meets your wishes as effectively as possible will help to prevent litigation.

Speeches and Events

Mr. Miller spoke about counseling families at the University of Richmond School of Law at 6:00 P.M. on October 6.

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